Fresnillo PLC (LSE:FRES) and Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) shares moved lower on Tuesday as London-listed precious metals producers responded to bullion’s retreat during the UK bank holiday weekend.
At the latest check, Fresnillo was off its session low, but still down 1.5% at 3,122p, while Endeavour fell 3.9% to 4,557p.
Gold was trading near US$4,450 an ounce, close to its weakest level in almost two weeks and below the three-month high reached last week.
US gold contracts for December delivery stood near US$4,483 an ounce, approximately 1% below Friday’s settlement of US$4,529.90.
The precious metal has come under pressure since Federal Reserve chair Kevin Warsh used his Jackson Hole address to warn that further monetary tightening may be required if inflation remains above the central bank’s target.
Expectations of another US interest-rate increase have subsequently risen, supporting the dollar and government bond yields. Higher yields tend to weigh on gold because the metal does not provide investors with an income.
Attention has now turned to this week’s US labour-market releases, beginning with job-openings data on Tuesday and culminating in Friday’s employment report. Strong figures could reinforce expectations that the Federal Reserve will raise rates, while weaker numbers may provide gold with some relief.
Renewed conflict involving the United States and Iran has offered some safe-haven support, although the resulting rise in oil prices has also increased inflation concerns and strengthened the argument for tighter monetary policy.
The decline in gold affects the earnings outlook for producers because movements in the realised selling price can have an amplified impact on margins once operating costs are accounted for.
Fresnillo, which produces both gold and silver in Mexico, has therefore been particularly sensitive to the precious-metals pullback. Endeavour Mining, which operates gold mines across West Africa, also tracked bullion lower as UK trading resumed following the long weekend.
